Banks facing credit card crackdown

Consumer advocacy group CHOICE has welcomed a suite of recommendations from the Senate Economics References Committee that would see major reforms to credit cards, helping Australians avoid sky-high interest payments and fees.

"From portability of account numbers to clear information around interest rates and minimum monthly repayments, these recommendations stand to help consumers make better choices about which credit card they should have," said CHOICE Campaigns Manager Erin Turner.

"The big banks have failed credit card customers for years, spruiking poor value and confusing products which can leave consumers locked into crippling cycles of debt.

"The fact is not one of the big four banks has a credit card in the top 20 by interest rate[1], yet they continue to dominate the market.

"Clearly there is a major problem with the way these cards are marketed and sold by the big four banks.

"If the Committee's recommendations are taken up, it will be a major win for Australian consumers, making the credit card market fairer, more competitive and more transparent," Ms Turner says.

CHOICE has called for changes to card cancellation policies, and the Committee's recommendation for banks to allow customers to cancel their credit cards online is a big step forward.

"Right now, customers trying to cancel cards are often left frustrated and confused, given the run around by pushy retention teams and upselling," says Ms Turner.

"We particularly welcome the Committee's support for giving Australians more information about the true costs of using credit cards. An 'informed choice' system would hand data back to consumers, and let them assess their costs and compare the products based on individual needs."

"These recommendations stand to help consumers avoid sky-high interest payments and fees, and we call on the Federal Government to adopt them without delay," Ms Turner says.

The recommendations come in the wake of CHOICE's September 2015 Consumer Pulse Survey that found 43 per cent of Australians are worried about their current level of mortgage and credit card debt.[2]

"Complex cards are designed to distract consumers from very high interest rates by putting the focus on rewards schemes, interest free periods, balance transfers and 'low' annual fees," Ms Turner says.

"There's still a long way to go, but the Committee's recommendations are a welcome step towards fixing the power imbalance between the banks and their customers."